Wednesday, September 18, 2013

A FLOOD OF HOPE

Alberta an economic leader despite devastating floodsReal GDP growth forecast to be best in Canada in 2014By Mario Toneguzzi

Calgary HeraldSeptember 17, 2013

CALGARY — Not even the worst floods in memory will be enough to restrain
Alberta’s economy this year, according to the latest RBC Economics Provincial
Outlook released Tuesday.

The report said post-flood spending will more than compensate for the drop in
economic activity related to the natural disaster as RBC is upwardly revising
its provincial real GDP growth rate to 3.2 per cent in 2013, up from the 3.0 per
cent previously projected due to the anticipated economic boost from post-flood
spending.

It will be the second best growth rate in the country this year behind
Newfoundland & Labrador at 6.0 per cent.

And RBC is forecasting Alberta growth of 4.1 per cent in 2014 to lead the
nation.

“There is no doubt Alberta’s economy took a hit after the floods, however,
the province has shown tremendous resiliency, and we expect the economy to
spring forward for the remainder of 2013,” said Craig Wright, senior
vice-president and chief economist for RBC. “Post-flood spending will more than
make up for the short-lived economic challenges Alberta experienced at the
beginning of the summer.”

Ben Brunnen, a Calgary economic consultant, said Alberta is well-poised for
growth into 2014.

“Oil and gas revenues are at their highest point since 2008, and industry
re-investment is comparable to 2011 when we saw five per cent GDP growth,” he
said.

“People have confidence in the Calgary economy. Unemployment is low, the
residential real estate market is strong, and we are at the front end of a major
commercial construction cycle.”

Adam Legge, president and chief executive of the Calgary Chamber of Commerce,
is not as optimistic as the RBC report.

“I think Alberta will do moderate growth next year restrained by lack of
market access, continued oil price differentials and a shortage of labour.
Flood-related spending does hit GDP but should be viewed as a temporary lift
that actually will create reduced GDP impacts in the future.”

RBC said that annual GDP statistics will fully capture the additional
spending and work required by the reconstruction, repair and replacement that
will take place, but will essentially ignore the destruction of or damage to
property.

“Even without this perverse lift that the floods will provide to the
provincial economy, Alberta continues to demonstrate substantial and sustained
economic momentum,” said Wright.

The report is forecasting 1.8 per cent economic growth for Canada this year
followed by 2.8 per cent in 2014.

“In addition to the boost from post-flood spending, we expect Alberta’s
economy to benefit from stronger capital investment in oilsands now that earlier
‘bitumen bubble’ concerns have largely receded,” said Wright.

Todd Hirsch, chief economist with ATB Financial, said Alberta’s economy is
set to pick up a bit of momentum next year after slowing down slightly in
2013.

“Stronger energy prices than a year ago are largely the reason. However,
agriculture has quietly but steadily regained a very strong position in
Alberta’s economy,” he said.

“Continued inflow of interprovincial migrants in 2014 should also ensure the
housing market remains healthy and balanced.”

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